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TMI Blog2021 (3) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... hence, in the circumstances estimation of sale on the basis of circulation certificate is totally unjustified and the estimation of sale on the basis of Circulation Certificate deserves to be quashed. 2. That on law and facts, the ld. CIT(A) has grossly erred in making addition of Rs. 34,22,814/- by applying Net Profit @ 14.26% on estimated sale of Rs. 2,40,02,905/-. The addition of Rs. 34,22,814/- is totally unjustified and against the facts on record and addition deserves to be quashed. 3. That the order of the ld. AO is bad in law and deserves to be quashed. 4. That the appellant reserves to the right to add, amend, withdraw or alter any ground of appeal before the finalization of said appeal." Grounds of assessee's appeal in ITA No. 1311/JP/2019 " 1. Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in holding the income received on leasing of land and building to be assessed under the head 'income from house property' and consequently allowing the deduction U/s 24 of the I.T. Act, 1961 ignoring the facts of the case that the land in question was allotted to the assessee on concessional rate for specific purpose of public interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms and conditions of the allotment, therefore, no relief should have been given by the ld. CIT(A) to the assessee. It was further submitted that ld. CIT(A) ignored the fact that the assessee had flouted the terms and conditions of numerous authorities just to reap benefits. As per the ld. DR, the norms of allotment of the total area to the assessee was subject to the condition that at the most, the assessee can sublet the area not exceeding 40% of the total built up area. Whereas on the contrary, the assessee while flouting those terms and conditions rented out 47.57% of the total built up area. The ld DR has also relied upon the findings recoded by the A.O., which are reproduced below: "6. The submission of the assessee has been considered carefully but the same is not acceptable. Vide notification No. 3(63) 4D/3/2005 dated 05/08/2007 of the Urban Development & Housing Department subletting of the premises by news papers was allowed on fulfillment of certain conditions such as: (i) registration of newspaper should be older than 30 years and is regularly published in Rajasthan which is not the case with this news paper. (ii) the total area sublet by an institution would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .00 As such in assessment order the Ld. AO has made addition of Rs. 33,35,135/- by disallowing standard deduction u/s. 24 on rental income and Rs. 2,40,02,905/- in trading results. 3. During the course of filing of return of income assessee filed audited Trading account, Profit & Loss account and Balance Sheet alongwith all annexures and audit report. Further during the course of assessment proceedings books of accounts, purchase and sale vouchers and expenses vouchers and all relevant record were produced and duly examined by the Ld. AO and no discrepancy was point out by the Ld. AO in respect of maintenance of books of accounts . Further the Ld. AO has duly accepted the books of accounts and action u/s. 145 was not taken by the Ld. AO. As such books of accounts was not rejected as provided u/s. 145. 4. Further submitted due to instruction No. 8 of 2017 dated 29.09.2017 issued by CBDT for conducting assessment proceedings the Ld. AO vide letter No. ITBA/Com/F/17/2017-18/1006681108(1) dated 05.10.2017 has informed the assessee to intimate her intention to participate in assessment proceedings electronically. The assessee has filed his intention to pass the assessment order el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty on rent. v) In the case of Hotel Arti Deluxe Vs. ACIT (2005) 97 TTJ 342 (Luck.)(tm) it has been held as under: "Assessee having let out a building simpliciter to a nursing home, through it was constructed to run a hotel, the rent receipt was attributable only to the ownership rights of the assessee and was liable to be assessed under the head 'Income from house property'. In the case of Neelam Cable Manufacturing Co. vs. ACIT (1997) 59 TTJ 476 (Delhi ITAT), it has been held as under: "Rental income received by the assessee from the leasing out of factory godowns and industrial sheds is assessable as income from property and not as income from business". In the case of New Paris Complex vs. ACIT (2004) 89 TTJ 684 (Coch.), it has been held as under: "Since the assessee-firm was carrying on the business of constructing and running shopping complex-cum-lodging house and not the business of banking, rent received by it by letting out a functionally independent portion of a building to a bank was assessable as income from house property". vi) As such looking to above facts the Ld. AO is totally unjustified to treat the income from house property as income from other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of certain conditions under other Act can lead to 'change the head of income'. We are of the view that it is an established law under the Income Tax Act that income can be charged under particular head of income on fulfillment of certain conditions depending upon the nature of income. However, non-fulfillment of condition under some other Act cannot impact the decision regarding charging of income under particular head of income and if some violations have been done by the assessee related to some other Act, then in that eventuality, the action for such violation can be taken under that Act only. 6.2 Since in the present case, the A.O. has failed to pin point any violation of any condition regarding chargeability of income under the head "income from house property". Therefore, in our view, the A.O. was not competent to treat the income earned by the assessee from rentals to be considered under the head "income from other sources". More particularly when the assessee had fulfilled all basic conditions for treating the income under the head "income from house property" as enumerated in Section 22 of the Act. We have also meticulously gone through the orders passed by the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation certificate the total actual sales, there are required to be filed for determining government advertisements rates. Such an argument of the assessee is self contradictory and not acceptable. By no stretch of imagination can one think of giving a discount of 50% in any business. On further perusal of market practices, it was gathered that a discount of around 25-30% is given to hawkers and distributors. Even if we consider maximum discount of 25% it comes out to be Rs. 1,66,27,500/- still sales are concealed to an amount of Rs. 2,40,02,905/- (4,98,82,500 - 2,40,02,905). Thus, amount of Rs. 2,40,02,905/- needs to be added back to the total income." 8. On the other hand, the ld AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) which are contained at para No. 3.2.1 of the order of ld. CIT(A) and the same are reproduced below: "3.2.1 Submission made by the appellant 7. Submission against addition of Rs. 2,40,02,905/-: i) That the trading results as per books of accounts are as under: Particulars Asstt. Year 2013-14 Asstt. Year 2014-15 Asstt. Year 2015-16 Sales 54,159,849.00 38,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any specific mistake in the books of account and did not reject the same but made addition and the Department is not challenging the finding of the CIT(A) that the provision of s. 145 could not be invoked, additions cannot be made on estimate basis". In the case of Sri Venkatraju Modern Boiled & Raw Rice Mill vs. ACIT (1997) 57 TTJ (Hyd.) 493, it has been held as under: "Without first rejecting books maintained by assessee showing cost of construction, the AO was not justified in making reference to valuation cell and then addition on that basis under s. 69". In the case of CIT Vs. Pratap Singh, Amrosh Singh, Rajendra Singh (1993) 200 ITR 788 (Raj. SC), it has been held as under: "In respect of the investment which is made in the property there can be only two methods to find out the correct position (one, when proper books of accounts are maintained and two valuation report). If the assessee has maintained proper books of accounts and all details are mentioned in such books of account which are duly supported by vouchers and no defect are pointed out and the books are not rejected, the figures shown therein have to be followed. The valuation report can be taken into consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verification, difference in value of stock as hypothecated to the bank and as shown in books of assessee could not be made subject-matter of addition". The assessee has maintained regular books of accounts and books were duly audited. GP rate was better in comparison to last years. Books of accounts duly examined by Ld. AO and no discrepancy were notice by Ld. AO further books of accounts has not rejected, hence addition on the basis of circulation certificate is totally unjustified. In the case of ACIT Vs. Shankar Exports (2011) 64 DTR 409 (Jpr.) (ITAT), it has been held as under: "When each and every details have been kept by the assessee, regular books of accounts are maintained and no defect was found by the AO, mere fall in GP rate could not been made basis for rejection of books and addition". 10. Even otherwise the Ld. AO has treated the entire sale of Rs. 2,40,02,905/- as income of the assessee from undisclosed sources. The action of the Ld. AO is totally unjustified and against the Act, since in the circumstances the Ld. AO is bound to make the addition on the basis of Net Profit rate (NP rate) declared by the assessee which is 14.20% during the year under appeal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as income by the A.O. and in that eventuality, the addition at the most could have been made on the basis of net profit rate. 10.1 The ld. CIT(A) after considering the contentions of both the parties had correctly held that the circulation certificate was part and parcel of the documents of the assessee record, therefore, the same was rightly made as basis for calculating the income of the assessee. However, the alternative plea raised by the assessee was considered to be genuine and therefore, only net profit declared by the assessee @ 14.26% was considered for the purpose of additions. The ld. CIT(A) after considering the decisions of Hon'ble Madhya Pradesh High Court as well as Hon'ble Gujarat High Court had rightly concluded that only net profit can be taxed in case of mismatch in figure of turnover and benefit of expenditure is to be granted to the assessee. 11. We have also considered the G.P./N.P. chart submitted by the assessee for the last three years which is reproduced below: Particulars Asstt. Year 2013-14 Asstt. Year 2014-15 Asstt. Year 2015-16 Sales 38,616,717.00 69,664,917.00 54,159,849.00 Gross Profit 7,083,939.00 14,733,205.00 11,768,745.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8,320.00 1,154,096.00 683,252.00 130,728.00 573,741.00 (3,306,620.00) (3,964,313.00) (3,380,999.00) 5,908.00 (3,262,716.00) Net Profit rate: 1.33% -6.55% -14.60% -8.76% 0.01% -6.02% On perusal of the above chart and the profit of loss account and computation of income which is part and parcel of the paper book, we found that the NP rate chart which is mentioned at page No. 19, the NP has been shown at Rs. 77,23,674/- which 'includes' rent receipts. However, in the above chart which has now been filed by the assessee which 'excludes' the rent receipt from the net profit claimed by the assesse. Thus, in our view, the assessee had rightly excluded the rent receipts from the net profit as from the financial statements i.e. from the computation of total income, we noticed that the rental income had been considered separately under the head 'income from house property' and on which tax has already been paid. Therefore, in order to avoid double taxation, the assessee had excluded the rent receipts from the net profit which has now been reflected in the above chart which is termed as Annexure-A. Under these fa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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